Freeing up Singapore's power market bittersweet for businesses

Singapore

SINGAPORE's liberalisation of the electricity sector - true to its ethos - has been able to save businesses as much as 25-30 per cent in power bills, but many lament that they are confounded by the plethora of choices, be it in terms of electricity retailers or their myriad packages.

A wrong choice or misstep could in fact cost businesses - think penalties if businesses decide to opt out with a retailer before the contract is up or fail to meet certain terms such as consumption levels and so forth.

"For SMEs, it can be a confusing time with the sheer number of electricity retailers that have sprouted up. While this has given us more options, it can also be challenging to choose between the retailers given the different plan types, contract duration and contract terms," bemoaned Sakae Holdings chairman Douglas Foo.

He added that not all SMEs have the time nor the expertise to make the best decision. In 2015, when the local sushi chain decided to switch from SP to a retailer, it had a headache.

"The entire process - getting quotations, comparing the plans and contract terms, and negotiating with the retailers - took one to two months. It was painful to go through that each time our electricity contract expired," he recalled.

When contacted, Energy Market Company's (EMC) chief executive Toh Seong Wah admitted that it was understandable for businesses to be "cautious" or "overwhelmed" by the options, more so as their stakes are higher than households as their electricity bills are "much larger".

"For the households, it is a simpler process. They just need to make a switch based on the standard packages offered," he said.

"(For businesses,) their contract terms and conditions (with the electricity retailers) are also more detailed and complex. For example, there may be volume clauses in the contract such that they could be penalised if their actual consumption deviates too much from the contracted quantities," Mr Toh elaborated.

Call it the growing pains of deregulation.

"We spent about a month understanding the quotes and other 'hidden' charges (of retailers)," said a senior executive of a Singapore-listed firm. That was at the start. Now, the company has become "quite seasoned" and gets quotes from at least three retailers at every renewal exercise.

Ultimately, there are two big determinants for businesses in opting for a retailer of their choice.

"Firstly, whether we are procuring electricity effectively and efficiently. Secondly, whether we are picking the right retailers who are here to stay, and if their offers are attractive," said Sakae's Mr Foo.

To ease that headache and help businesses secure the best offers quickly, an online portal called PowerSelect developed by EMC - a wholly owned unit of the Singapore Exchange - was launched last November, offering different procurement options including a unique 15-minute live auction. It also houses data from the wholesale and futures electricity markets.

So far, half or 11 of the retailers have hopped on to the portal and Sakae was the platform's first customer. There may be a strong case for businesses to use PowerSelect as according to Mr Toh, it could save them an additional 5-15 per cent versus going in on their own to get quotes from retailers.

None of the encumbrances facing businesses such as choice overload however can detract from the one big plus of liberalisation - helping businesses save on power bills.

According to 8M Real Estate's asset manager Janelle Wong, the company has "knocked off savings of 15-25 per cent" as a result. She added: "It has been good news for many of us - as long as there are economic savings."

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